The State Bank of Pakistan has reportedly agreed to the Securities and Exchange Commission of Pakistan recommendations to allow financial institutions to amortise the deficit upon revaluation of listed equity investments, TFCs and Sukuk, it is reliably learnt.
On January 27th, 2009 SBP had ordered that banks and DFIs may use market prices as prevailing on 31st December, 2008 for the purpose of preparing Annual Financial Statements for the year ended December 31st, 2008. However, the surplus or deficit so determined will be reflected in the profit and loss account as well as on the equity side in the balance sheet.
The Institute of Chartered Accountants of Pakistan (ICAP) had instructed its members to take the impairment in the profit and loss accounts. Since the issue was also impacting the whole of the corporate sector besides financial institutions, SECP reportedly took up the issue with SBP on Saturday last. SECP felt that the extraordinary happenings on the Stock Exchange required a mere flexible approach and the current situation demands some kind of relaxation.
ICAP reportedly agreed to reconsider its earlier stance provided there was consistency in the treatment of mark-to-market valuation across the corporate sector. It was therefore, resolved by both the regulators to allow companies to recognise 50 percent of the impairment in 2008 and recognise the balance of impairment in 2009. However, the impairment will be recognised in full in the equity side for distribution of dividend. Announcement to the above effect is expected from both the regulators.